Junior traders offered immunity in forex probe

US prosecutors are offering immunity deals to junior traders in London as they try to gather evidence against banks and more senior staff in the investigation into alleged currency market manipulation.

US Department of Justice staff have flown to the UK in recent weeks to interview foreign exchange traders, who have been offered partial immunity in exchange for volunteering information about superiors, people familiar with the situation said.

Such “proffer agreements” allow individuals to give authorities information about crimes with some assurances they will be protected against prosecution, as long as they do not lie.

The move marks another step in the global investigation into collusion and market-rigging in the $5.3tn a day currency market by at least 15 regulators and prosecutors. They are investigating allegations that bank traders and sales staff used chat rooms and other means of communication to share client information and manipulate daily currency benchmarks.

Most authorities initially gave banks free rein to conduct their own probes, prompting the suspension, placing on leave or firing of so far almost three dozen staff at 10 banks and the Bank of England, where one official has been suspended.

One senior lawyer said the DoJ probe was well-advanced. The DoJ declined to comment. Referring to general criminal activity, Leslie Caldwell, its criminal division chief since May, told the FT last week that the authority would be “appropriately aggressive” and seek to bring “timely” cases against financial institutions.

However, another lawyer said that while the DoJ had offered immunity deals to a number of traders, most had so far declined as they did not have “killer evidence” to trade against leniency.

The regulatory probes, coupled with a deep slump in revenues and an accelerated move towards more automated trading, has created a sense of frustration among senior traders this year that has prompted many to retire or move from banks to hedge funds.

Roger Böhler, chief dealer at UBS in Connecticut, has been the latest senior trader to leave his employer in recent weeks, people close to the situation said. The reasons for his departure are not known. Mr Böhler could not be reached for comment while UBS declined to comment.

Senior bankers fear the forex probes will prompt another round of multibillion dollar penalties echoing the punishment meted out in the Libor-rigging scandal, which has so far cost the industry $5.8bn in fines.

It is already clear from some banks’ internal investigations that there have been instances of traders sharing information about overall trading books, individual client orders and the spreads they are charging, several people close to the situation have said.

Germany’s financial regulator and Switzerland’s competition commission have confirmed publicly in recent months that they have found evidence of wrongdoing.

The scandal has also spurred a political and regulatory push to reform the so far mostly unpoliced currency market.

Minouche Shafik, the incoming Bank of England deputy governor, said at a parliamentary hearing last week that one of the main questions that needed to be asked about benchmarks was whether current voluntary codes governing the markets were sufficient.

While cautioning that she was not privy to current investigations into past practices by the Financial Conduct Authority, she added: “There is sufficient reason to think there are serious problems and the current practices are not adequate.”